Hey Guys,
Yesterday when I emailed, an inflation report had just come out with bad figures that caused the market to spike downward.
And yet somehow, over the course of the rest of the day, the market ended up exploding upward. By the end of the day, the S&P 500 had gotten near 3,700, which was noticeably higher than it had been the entire week. It was a 150-point turnaround.
It marked the fifth largest intraday reversal from a low in the history of the S&P 500. If I had heard just that tidbit without knowing anything else, my first thought would be, "Maybe there was some good news that came out midday that changed the sentiment of the market."
But there was none that I was aware of. The bad inflation report hadn't changed. No new information had come out. According to all the analysis I read, the market appears to have simply changed its sentiment about the overall situation. And for some reason, it changed on a scale of historic proportions.
We knew that things were volatile yesterday, but that sort of market activity may have been a surprise to many people. And it underscores a concept that I talk about frequently: we can never be sure what's coming next in the market. Sometimes the market does things that don't seem intuitive and ultimately not one single person can say with certainty what the market will do next.
That's why I enjoy using a back-tested trading approach. Rather than trying to predict what the market will do next, instead I look back at decades of history across a huge spectrum of stocks and stick to a trading strategy that has evidence of standing the test of time through thick and thin. I accept that there will be twists and turns and that not every trade will work out. It's a numbers game, and I allow history to guide me on where the odds might be in our favor over time.
There were no new trades today. I didn't close any positions today either.
If you have any questions or feedback, I'd love to hear from you.